Wednesday, August 19, 2009

Obi-wan wisdom

( 8-19-09)
(as the discussion continues on the IRL's future and their current problems)


I agree with your short term assessment in that I think the family is only beginning to come to terms with the mess they find themselves already hip-deep in. I believe the tendency will be to try a “white knight” or two to head up the organization and save them; which will continue right up to the magical 100th anniversary in 2011. After that – assuming they get that far – all bets are off.

That gives the family plenty of time to plan an exit strategy. Where the promoters are concerned ISC is already operating on one-year contracts for the most part and is showing a disturbing (if you’re a Gomer) tendency to withdraw races as soon as its contract is up. ISC accounts for four of seventeen races in 2010. Andretti-Greed Productions is obviously subsidized by Honda yen and HoMoCo accounts for another three races on the 2010 schedule. If the Hulmans turn the 500 into a stand-alone event, as I expect, Honda is unlikely to object as long as it is the league’s exclusive engine supplier and continues receiving lease money; really, Indy is the only race that the Japanese care about (as they have always been brand conscious). If the Hulmans go it alone with the 500, expect Honda to assuage the hurt feelings of Andretti and the Greed brothers on their own; anyway, there are strong indications of a breakup of AGR in the very near future and the team principals might have contract troubles of their own with Honda.

Assuming the rumors of an outrageous sanction fee and appearance money for Brazil are true, one running of the race will be enough to convince the locals that they’ve been had; they’d probably welcome a cancelation of their contract. Both Toronto (a Honda race) and Edmonton lost money for their promoters (the city fathers), so I don’t think they would put up much of a fuss about cancellation of their deals. For most of the remaining races on the 2010 calendar, I think Cave-in and the Gomers are dreaming about $1.2 million sanction fees. I wouldn’t be surprised to find that many of the races are either free or nearly so. Cave-in, for example, estimates that it takes 42,500 paying customers at an average ticket cost of $40 to break even on a race with a $1.2 million sanction fee; how many IRL races even approach that many spectators (especially in the tiny venues Angstat feels comfortable in)? I mean, Barber and Iowa paying million-plus sanction fees on five-year contracts? C’mon, let’s get real.

My guess is that most of the SMI-promoted events are track rentals or about to become so; consequently they probably are running on short-term leases; all except Texas, that is. Expect Eddie Gossage to cry crocodile tears to his hometown audience and try to wring out every last cent in damages from the hapless Hulmans. Long Beach could be problematic, too; it depends. I think the family would be wise to buy the race contract from the remaining two ah-me-goes and then shut it down.

Where TV is concerned, as long as The House of Mouse has the Indy 500, they’ll be copacetic with a further “condensing” of the League. As for Versus, who knows? Their high hopes for a flagship motor sport to take them to the next level are certainly getting a dose of reality; they’re doing better with bicycle racing.

That leaves sponsors. With their current ROI, how many marketing boys does one suppose are going to get a hard time from their BoD’s when they tell them the company won’t be having to lay out any more cash on a bad investment in the worst recession since the Big One circa 1929-1941?

I see the “short term” survival of the IRL only until 2011, if the league can last that long. After that, the league is gone and the Indy 500 is stand-alone and/or IMS is up for sale. That is, of course, unless Mari slips on a liquor bottle and falls down the stairs or some such; if that happens, then it’s bye-bye, baby, bye-bye for IMS (if for no other reason than inheritance taxes).


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